Use the Information for the Question(s)below

question 10

Multiple Choice

Use the information for the question(s) below.
Monsters Incorporated (MI) is ready to launch a new product.Depending upon the success of this product,MI will have a value of either $100 million,$150 million,or $191 million,with each outcome being equally likely.The cash flows are unrelated to the state of the economy (i.e.risk from the project is diversifiable) so that the project has a beta of 0 and a cost of capital equal to the risk-free rate,which is currently 5%.Assume that the capital markets are perfect.
-Suppose that MI has zero-coupon debt with a $125 million face value due next year.The yield to maturity of MI's debt is closest to:

• A)12.5%.
• B)7.8%.
• C)25.0%.
• D)5.0%.

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Definitions:

Love And Affection

Love and Affection, in legal terms, sometimes appears as a form of consideration in personal contracts, though it is not typically recognized as a valid form of consideration in commercial contracts.

Past Consideration

A benefit or value provided or promised in the past, which cannot be considered valid consideration for a current contract under common law.

Past Consideration

A legal concept indicating that an act done before a contract is made is not valid consideration for the contract.

"The Answer"

Often used metaphorically to denote a solution or response that resolves a question or problem comprehensively.